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EU Commission warns Italy, France to rein in debt

The EU's executive has told Italy to tighten its budget this year and criticized France for not doing enough to rein in public debt. Germany should invest more and reform its tax system, the Commission said.

The European Commission stopped short of launching a disciplinary procedure against Italy on Monday, but it urged the

eurozone's third-largest economy to rein in excessive public debt


It called Italy's growth and economic forecasts "slightly optimistic," which is why its target of cutting the structural budget deficit by 0.2 percent of output could not be met, according to the EU executive.

Italy's public debt has risen by 29 percent since 2007 and stood at 132.6 percent of gross domestic product (GDP) at the end of last year. The EU's reference ceiling is 60 percent.

France must do better

The Commission warned France that its efforts to rein in the deficit were falling short.

"Overall, the budgetary strategy outlined in the program is only partly in line with the requirements of the Stability and Growth Pact," European Commission Head Jose Manuel Barroso said.

Paris, which will remain under close supervision by the Commission as it again missed EU budget targets, has promised 50 billion euros ($70 billion) worth of cuts and reforms, which Barroso acknowledged were "heading in the right direction."

But he added that it was "essential that France pursue the reforms with determination in the coming months" by focusing on

spending cuts

, instead of merely raising taxes.

Invest more, Germany told

Germany was given a clean bill of health for its budget - the Commission said its plans to reduce overall, accumulated debt were "plausible" and that its fiscal policy was geared towards growth.

But it urged Germany to invest more in infrastructure, education and research. It also recommended that Berlin reform its cumbersome tax system to make it more efficient.

The Commission said the government should do more to raise the retirement age, running contrary to measures announced recently by the German government that

enable some to retire aged 63


The Commission released its annual budgetary recommendations for all 28 EU members on Monday.

ng/nk (Reuters, AFP)

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